Government backs minimum wage boost to meet living costs

The next pay rise for Australia’s lowest-paid workers should match soaring living costs, according to the Australian government’s submission to the minimum wage case, setting up a clash with businesses calling for wage restraint.

But the government submission to the Fair Work Commission does not suggest “across-the-board wages” should automatically increase in line with inflation, as employers call for a 3.5 per cent pay rise for low earners – a real wage cut – to keep inflation at bay.

Workplace Relations Minister Tony Burke says the lowest paid have “no space” despite easing inflation.

Rhett Wyman

“The Australian government recommends that the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards,” the submission will say, mimicking Labor’s position last year after Anthony Albanese said during the election that workers’ wages should keep up with inflation.

Data from the Australian Bureau of Statistics yesterday showed the inflation rate falling to 6.8 per cent in February from a peak of 8.4 per cent in December, although prices in some sensitive sectors continue to rise.

Workplace Relations Minister Tony Burke and Treasurer Jim Chalmers said in a statement that nominal wage growth has lifted, but high inflation has seen real wages fall behind.

The Australian Chamber of Commerce and Industry said a 3.5 per cent increase to the minimum wage – half the 7 per cent demanded by the union movement – was necessary to stave off inflationary pressures on small business owners.

But Burke rejected the argument inflation was “the fault of ordinary wage earners” and signalled he’d back a larger boost for the lowest paid.

“To be helping the people who are doing it the toughest, doesn’t mean that you then get that ricocheting the whole way through the wages system,” Burke told Sky News.

About 180,000 Australians earn the minimum wage, but the benefits of a pay rise flow through to more than two million workers on award wages.

ACCI head Andrew McKellar said a 3.5 per cent wage rise, and a 0.5 per cent superannuation contribution from employers on top, would deliver a “responsible outcome consistent with getting inflation back into the target range that the Reserve Bank has set out”.

He said the reduced ability for low earners to be able to meet living costs was “all the more reason to get inflation back under control to avoid further increases in interest rates”.

But Burke said “it’s also important to remember that every small business needs customers who can spend money.”

Council of Small Business Organisations Australia chair Matthew Addison agreed small businesses needed customers ready to spend, but said an increase consistent with ACTU’s 7 per cent push would spur businesses to pass on their costs.

Treasurer Jim Chalmers said workers’ pay shouldn’t go backwards amid rising inflation.

Rhett Wyman

Burke and Chalmers cautioned the government’s submission didn’t suggest that all wages should automatically increase in line with inflation, “or that inflation is the only factor the Fair Work Commission should consider”.

Last year, when the quarterly consumer price index was 5.1 per cent, the commission awarded workers on skilled awards a 4.6 per cent increase, lower than the 5.2 per cent increase it awarded minimum wage earners.

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